The DeLaGarzas make more than they spend, and spend what they make on real estate.August 27, 2004: 11:24 AM EDT
By Deshundra Jefferson, CNN/Money staff writer

NEW YORK (CNN/Money) -
James DeLaGarza made his money the old fashioned way. He earned it.

The 34-year-old married father of five worked as a full-time waiter for three years while studying finance at Texas Tech University in Lubbock. And get this: He finished his Bachelor of Arts degree in four years.

"I definitely took four years because I had to pay my way through and work," he says.

James moved to Dallas shortly after graduation to pursue a career in real estate and within four months, he met Lisa on a blind date set up by her sister and brother-in-law.

"I liked his smile," Lisa, 34, recalled about their initial meeting. "He was very funny and he had a good sense of humor."

Her sister was definitely on to something. The young couple was married six months later.

The early years

James opened his own real estate brokerage in 1995 after working in sales for three years. He earned $17,000 his first year in real estate sales and $30,000 his second -- a far cry from the $250,000 he currently makes -- but says he learned a lot about sales during those lean years.

"I struggled and suffered my first year in real estate because I kept thinking about me and not the client," James says. "When you get overtrained and overcoached -- make the sell, make the sell -- you focus on the paycheck."

But it's also hard not to focus on that next paycheck when you're sitting on a pile of debt. At one point James had $30,000 worth of credit card debt plus an $18,000 five-year car loan. He also owed $20,000 in student loans, which he deferred for two years.

Lisa, on the other hand, was relatively debt-free, except for a $2,000 student loan she used to cover her two years at Ricks College.

"It was amazing that she even married me knowing that I had all that," James laughs.

Luckily, she had a different point of view. "Worldly things don't get to me," Lisa says.

Lisa, now a full-time homemaker, worked as a bookkeeper until their second child was born. After that, she opened an at-home daycare in order to spend more time with her kids and save on childcare costs.

"I totally enjoyed it," she says. "We had a whole room just set up with toys and play sets."

Although Lisa's business helped to make ends meet while James developed his own fledgling enterprise, it took the young couple seven years to dig out of debt.

"When you have unmanageable debt, debt controls you," James states. "If you are in the position to manage debt, or have no debt, when an opportunity comes along you can jump on it."

Real estate rules

The DeLaGarzas make accelerated mortgage payments for their real estate portfolio -- which includes their primary home outside of Dallas, two nearby rental homes, and a condo in Florida -- to pare down their debt quickly and slash interest costs.

The condo serves as both a second home and a rental unit, which adds an extra $12,000 to their income every year. And its value more than doubled to $420,000 from $205,000 in the three years since they bought it.

James is ready to plunk down an $11,000 principal payment for September. He says that he's learned from past experience that making large payments is less painful than paying the minimum.

"Going through the pain of the first two to three years, it set me in a situation where I hate debt," he says. "That's why I'm chunking it off now."

The rental market is soft in their area, so they only break even on one of their rental homes, but earn some $200 a month on the other. James says they recently decided to use that extra money to pay it down faster. They also add $600 to their monthly mortgage payment for their primary home in hopes of paying that off by the time they are 38.

Their immediate financial goal is to finish paying for the condo by the end of next year and use the money they receive from renting it out to pay the property taxes on their primary home and the condo.

The DeLaGarzas' monthly mortgage payments come to $5,202.07 a month, but their home equity equals $557,000.

Real estate, however, isn't their only financial investment. The DeLaGarzas have stashed $137,523 in their retirement accounts (they contribute $30,000 a year to a SEP-IRA). They also put $1,000 a month into a 529 college savings plan for their children, aged 3 to 10, that has a total value of about $36,000.

Other assets include: $45,195 in their checking account and emergency savings fund; $14,800 in stocks; and $5,773 in mutual funds (they invest $400 a month).

As it stands, their current net worth has already reached $796,291, with no debt other than mortgages.

Hard work has gotten James and Lisa far, but all work and no play isn't exactly their motto.

"I'm a real big believer in enjoying your time while you're here," James says. "We still travel a lot."

Still, James concedes he loves real estate. He wants to be in a position to retire at age 50 even though he doubts he will actually stop working by then, especially if one of his kids decides to go into the family business.

"With four boys, one of them is bound to be interested in real estate," he says.

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